US-based iGate in $1.2-bn Indian outsourcing deal

Jan 10, 2011 by Salil Panchal
US-based iGate and a British private equity firm announced a 1.2-billion-dollar deal on Monday to buy one of India's oldest software firms in a major move into the outsourcing business.

US-based iGate and a British private equity firm announced a 1.2-billion-dollar deal on Monday to buy one of India's oldest software firms in a major move into the outsourcing business.

The consortium of Pittsburg-based iGate and private equity firm Apax Partners is to acquire a controlling 63-percent stake in privately-owned Patni Computer Systems, which has 2,000 global clients and 16,000 employees.

"The combination will help customers get better service, access to more service lines and deeper pools of expertise," Phaneesh Murthy, chief executive of iGate, said in a statement from the southern city of Bangalore.

Patni, which was set up in 1978, failed to capitalise on its dominant market position when India's economy was liberalised in the early 1990s and overseas firms began seeking Indian companies to outsource work.

That led to newer outfits like Infosys Technologies and TCS gaining a foothold and going on to dominate the market.

iGate, which has business data processing and IT consulting operations, is far smaller than Patni, with revenues of $250 million, against Patni's $690 million.

iGate and Apax have agreed to pay 503.50 rupees ($11.1) a share for the stake, which comprises a 45.6-percent share from Patni's three founding brothers and 17.4 percent from private equity firm General Atlantic,

Shares of Patni jumped nearly four percent to an intraday high of 477.8 rupees on the Mumbai stock exchange on Monday, before dropping to 463.85 at the close on profit taking.

The deal is expected to be completed in the first half of this year, iGate said.

No decision has been taken to delist Patni from local stock exchanges, while iGate will remain on the Nasdaq, Murthy told a Bangalore news conference.

More than half of the world's top 500 companies outsource work to India's IT sector, which provides call centres, number-crunching and software development at far lower costs than in developed countries.

India's outsourcing business witnessed a revival in demand last year in its key market of the United States, raising the prospects of a sector which suffered a dip during the global financial crisis.

In April 2009, mid-sized outsourcer Tech Mahindra paid nearly $600 million for a majority share of fraud-hit Satyam, after its founder confessed to falsifying accounts in India's biggest accounting fraud two years ago.

Explore further: Birch Communications buying Cbeyond for $323M

add to favorites email to friend print save as pdf

Related Stories

India's TCS announces 29 pct quarterly profit jump

Oct 16, 2009

India's biggest software services exporter, TCS, reported Friday that its quarterly net profit rose by 29 percent as the company sealed more deals in a better global business environment.

India's fraud-hit Satyam seeks delisting from NYSE

Sep 24, 2010

India's fraud-hit software firm Satyam Computers said on Friday it plans to delist from the New York stock exchange as it may not be able to meet the US deadline to file restated financial accounts.

Recommended for you

TCS, Mitsubishi to create new Japan IT services firm

3 hours ago

India's biggest outsourcing firm Tata Consultancy Services (TCS) and Japan's Mitsubishi Corp said Monday they are teaming up to create a Japanese software services provider with annual revenues of $600 million.

Chinese tech giant Alibaba set to make a splash with US IPO

19 hours ago

The largest tech IPO of the year will come from a company that many Americans have never heard of. Alibaba Group - a Chinese e-commerce behemoth - has decided to go public in the U.S. after months of speculation that it would ...

Ex-Apple chief plans mobile phone for India

Apr 19, 2014

Former Apple chief executive John Sculley, whose marketing skills helped bring the personal computer to desktops worldwide, says he plans to launch a mobile phone in India to exploit its still largely untapped ...

User comments : 0

More news stories

Students take clot-buster for a spin

(Phys.org) —In the hands of some Rice University senior engineering students, a fishing rod is more than what it seems. For them, it's a way to help destroy blood clots that threaten lives.

Finnish inventor rethinks design of the axe

(Phys.org) —Finnish inventor Heikki Kärnä is the man behind the Vipukirves Leveraxe, which is a precision tool for splitting firewood. He designed the tool to make the job easier and more efficient, with ...

First steps towards "Experimental Literature 2.0"

As part of a student's thesis, the Laboratory of Digital Humanities at EPFL has developed an application that aims at rearranging literary works by changing their chapter order. "The human simulation" a saga ...